Posts Tagged ‘worksite Long Term Care Assisted living’

University of Tennessee’s announced this week that their highly regarded Women’s Basketball Coach, Pat Summitt, has been diagnosed with Alzheimer’s disease. She’s only 59.

Ms. Summitt is a paragon of fitness and sports. Her team has amassed over 1,000 victories and nine national championships. She is now the face of younger people living with Alzheimer’s.

Over 200,000 people in the United States living with Alzheimer’s are under the age of 65. Alzheimer’s is one of the leading diseases requiring long term care support.And one of the most expensive.

When employers think of long term care, they often think of retirement and the elderly. However, long term care needs can begin early from disease as in Ms. Summitt’s case, an auto or sports accident, or another type of diagnosis.

The need for long term care insurance is growing in this country as nursing home and assisted living care costs reach toward $100,000 annually.

Few of us can afford that without wiping out savings, and perhaps even losing our home.

This is why employers need to rethink their benefit portfolio to include long term care insurance option for employees.

With the rapid rise in long term care costs, a need among younger employees, and potential changes to Medicare and Medicaid in Congress, employers will need to fill the gap.

Nobody wants it…It’s too expensive…I tried it and the results were horrible…The last thing I want to do is jeopardize my existing business.

Who would say these things, and what do you think they are talking about? Answer: Benefit brokers talking about employer-sponsored long term care insurance.

Perception is reality. Understanding why benefit brokers feel this way about long term care insurance could move us toward helping millions of American employees solve a planning problem—one with devastating consequences most are not even thinking about.

With the CLASS Act scheduled to become effective January 1, 2011, every employer will be required to make decisions regarding long term care insurance. If private insurance is going to be part of the solution to the long term care crisis, benefit brokers need to be part of it. They have relationships and access to key decision-makers, which is the beginning of the sales process.

It Hasn’t Been Done RightImagine playing table tennis with a tennis racquet. Assume all the rules of table tennis are the same except you need to hit the little ball with a tennis racquet. What’s the problem? Table tennis and tennis both have the word tennis in them and they both require you to hit a ball over a net with a racquet. Try this yourself and it will become painfully obvious you are at a disadvantage with the tennis racquet.

Well, selling long term care insurance and health insurance are both selling insurance, aren’t they? Yes, but there are differences, and those differences go a long way to explaining the results benefit brokers have experienced.

Let’s consider a few differences. Human resources executives know what health insurance is and they go through an analytical process of comparing premiums and features when making purchase decisions. There is no emotional involvement and there is a deadline for a decision. Long term care, on the other hand, is not understood, and it requires people to think about things they would rather avoid. You don’t really need to make a decision since you can do it any time. Long term care is way off in the future and it probably isn’t going to happen to you anyway, right? It’s probably something your parents should be thinking about.

Selling a product people don’t understand and don’t want requires a different sales approach. Salespeople need to be up to the task of asking personal, probing questions to get decision-makers emotionally engaged.

Start with Education
Education drives success in long term care, and benefit brokers need to change from analytical sales techniques that work for their other lines to techniques that engage prospects emotionally. Rather than selling, you are guiding companies through an issue that can profoundly impact the people responsible for their business success. A concerted effort is required, and it will differentiate the broker who does it well.

The most common mistake brokers make with LTC insurance is delivering a proposal before a prospect understands the issue and connects emotionally. Rare is an executive level meeting where there isn’t a participant with his own story to share.

Employer presentations must engage prospects to talk about their own experiences, how they feel about their employees, and how they came to offer the benefits in their package.

Asking questions is the key as employers share their business philosophy about recruiting, rewarding and retaining top people. Providing education on the limitations of traditional health insurance, Medicare and disability insurance after talking about their own benefit package helps employers connect the dots to see the hole in the safety net.

CLASS Versus Private Insurance
The first decision for employers is whether to participate in the CLASS Act. Suffice it to say, there are a lot of negatives about CLASS, according to both government and private experts.

CLASS is a one-size-fits-all program with a nominal benefit, projected to be more expensive than private insurance due to adverse selection. Private insurance, on the other hand, has limited underwriting to screen out those with significant medical conditions to control cost. Offering private insurance now locks in medical insurability and the least expensive age-based rates.

When CLASS does become available, policyholders can evaluate their private coverage from a position of strength and make decisions in their own best interest.

There will be a lot of press on CLASS, and benefit brokers need to start dripping information to their clients and prospects now, so that when it becomes available they don’t accept it at face value without considering coverage in the private market.

Voluntary Versus Employer-Paid
Private long term care insurance benefit programs with underwriting concessions and discounted premiums can be implemented without cost to employers. And that is how to begin the conversation. After all, how many companies today are looking to spend more money on benefits?

With that said, once employers have been engaged on the issue and see the minimum contribution required to lock in discounts and the most favorable underwriting, many choose to contribute toward coverage. In some cases, however, there really is no budget, and that doesn’t mean brokers can’t provide value to clients and themselves if the program is sold properly.

Commitment Starts at the Top
Voluntary long term care insurance enrollments offer tremendous benefits for employers and their employees; education at an early age, underwriting concessions that help people with pre-existing health issues get approved for coverage and premium discounts. Without buy-in from the top, however, it is difficult to get the level of cooperation needed to deliver maximum value. The primary success factor in implementing a long term care insurance benefit is the ability to get in front of employees with education. Buy-in at the top provides the commitment necessary for communications strategies, workshops, and one-on-one follow-up meetings during work hours needed for success.

Different Profit Model
A discussion of long term care insurance would not be complete without talking about compensation. I’ve had brokers who introduced us to their clients for a commission split say that even if they received 100 percent of the commission, long term care does not generate enough income to make it worth their time.

No doubt it is a different model. As opposed to health insurance commissions that are level each year, commissions on long term care are high in the first year and low thereafter. Yet, unlike group health products, commissions on long term care are vested and premiums are the most persistent of all insurance products. Over the course of 10 or 15 years, a significant renewal premium can be built that will pay vested commissions for as long as employees live and continue to pay premiums. The business model needs to be looked at with, pardon the expression, a “long term” view.

Opportunity Meets Need
Less than 1 percent of the 5 million employers with fewer than 1,000 employees offer coverage—thus, long term care is a wide open opportunity in the midst of a very competitive benefits marketplace.

The CLASS Act will require every employer to make decisions regarding long term care; and, as employees hear about it, they will begin asking questions. For employers, it is an opportunity to generate goodwill by demonstrating an understanding of the issue and providing informed guidance to their employees before questions begin. For benefit advisors, it’s an opportunity to create a new source of revenue and add to their value proposition.

Understanding the details of CLASS and how it compares to private insurance is the starting point for employers. As we move closer to the implementation of CLASS you can be sure someone will be calling your clients to discuss long term care. Shouldn’t that person be you?

Empower helps employers of all sizes implement long-term care insurance benefit programs in the workplace and conducts workshops & educational classes concerning LTC and the CLASS Act for employers and employees. If you would like to know more about the CLASS Act and how it might impact your company call us.

We also provide resources, training, and assistance to brokers looking to educate and help their clients with Long Term Care and understanding the CLASS Act.

The CLASS Act, which goes into effect on January 1st, 2011, will impact Employers and Brokers. In this podcast Long Term Care expert Doug Ross discusses the issues and concerns.

Listen Now!

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Empower helps employers of all sizes implement long-term care insurance benefit programs in the workplace and conducts workshops & educational classes concerning LTC and the CLASS Act for employers and employees. If you would like to know more about the CLASS Act and how it might impact your company call us.

We also provide Resources, training, and assistance to brokers looking to educate and help their clients with Long Term Care and understanding the CLASS Act.

Remember when you were young and you learned what happens when people assume things? You make an a_ _ out of you and me. Well, if people assume CLASS Act coverage is the same as private long-term care insurance, making an a_ _ of themselves could be the least of their problems. Coverage with CLASS is much different than private insurance and it’s in everybody’s interest to understand those differences.

Regulation differencesPrivate insurance carriers are required to withhold significant reserves based on the amount of insurance sold. Those reserves must be invested and set aside to pay future claims to protect policyholders. Another difference is the process of increasing premiums on existing policyholders in the event it becomes necessary. For insurance companies to increase premiums, they must receive approval separately from each state Department of Insurance individually and premiums must be increased the same for every person that ever purchased that policy series regardless of age, how long they owned the policy or health.

With CLASS Act on the other hand, the power to increase premiums rests completely with the Department of Health and Human Services and reserves are not held to pay claims. Premiums paid into CLASS are credited to a trust account and accrue interest, but the funds are used to pay current bills. In effect, the government holds IOU’s from itself to pay future claims.

The trigger to collect benefits under CLASS Act can be changedThere is more than one way to increase premiums to policyholders. Only the Federal Government allows itself to change the rules of the contract after customers purchase the policy. If you read the CLASS Act where the definition of how you become benefit eligible, it says that “an individual must either require help to perform either 2 or 3 Activities of Daily Living or have a cognitive impairment”. Private insurance requires people to require help with 2 ADL’s. There is no opportunity to change the trigger to 3 ADL’s which would obviously limit the number and size of claims paid.

Five year waiting periodPrivate insurance is purchased with a waiting period that can be between zero and 365 days depending on the carrier. CLASS Act does not have an elimination period but requires you to pay premiums for 5 years before becoming benefit eligible and you must work for three of those years. What happens if you have an accident within a couple of purchasing coverage?

FlexibilityPlanning for long-term care is not a one-size fits all proposition and that’s what CLASS Act offers. Private insurance coverage has a lot of flexibility and options to tailor coverage that fits each persons specific circumstances. And according to current estimates, private coverage will be less expensive for the 85% of people healthy enough to be medically underwritten when they apply at a young age through an employer sponsored program.

Education for employeesIt can be argued that education is the most important benefit when companies implement long-term care insurance benefits. People tend to tune out when the discussion of long-term care arises. Some think it’s only for seniors and others choose to ignore the topic because of more pressing financial obligations. CLASS Act limits the amount of money that can be spent on administrative, marketing and administrative costs. Not providing education limits participation and ultimately increases adverse selection as less healthy people will be more inclined to participate.

Empower helps employers of all sizes implement long-term care insurance benefit programs in the workplace and conducts workshops & educational classes concerning LTC and the CLASS Act for employers and employees. If you would like to know more about the CLASS Act and how it might impact your company call us.

We also provide Resources, training, and assistance to brokers looking to educate and help their clients with Long Term Care and understanding the CLASS Act.

The U.S.A. seal of approval is as good as the Good Housekeeping seal of approval for many citizens. After all, the Federal government has never reduced Social Security benefits or Medicare and the country has not shown the political will to curb spending on these politically popular programs. Everything has limits though and if the Federal deficit is not approaching its limit, it be getting close.

Besides that, CLASS Act is fundamentally different from Social Security and Medicare because most every American participates in both these programs. CLASS Act on the other hand is voluntary; each person, young, old, healthy and sick will make an individual decision to participate or not. And that’s the problem. As discussed previously, a voluntary program violates the fundamental underpinnings of all insurance; spreading a risk over an entire population.

According the Allen Schmitz, FSA, MAAA from Milliman, and independent and highly respected actuarial firm, CLASS Act premiums are actually more likely to increase than private insurance. He says “there is probably greater risk that CLASS Act will need rate increases than the private market”. There are many reasons for this and several have been discussed in previous posts. Adverse selection, premium subsidies for certain groups, limitations on increasing premiums for certain groups.

Another issue understood by few people without an insurance or actuarial background is the methodology of determining the rates that will be sustainable over a 75 year window. By statute CLASS must set rates to ensure financial viability for 75 years, and after 10 years the Department of Health and Human Services will review pricing to ensure the program enough premiums collected to cover benefits projected for the next ___ years.

The problem with using a 75 year window is that it does not take the “tail” of long-term care into consideration. What I mean by that is at the end of 75 years you have many healthy people who have contributed premiums for 20, 30 and even 50 years. Well when they figure solvency at the end of 75 years, the claims that will come due for all those people who have paid in to the program are not considered.

Empower helps employers of all sizes implement long-term care insurance benefit programs in the workplace and conducts workshops & educational classes concerning LTC and the CLASS Act for employers and employees. If you would like to know more about the CLASS Act and how it might impact your company call us.

We also provide Resources, training, and assistance to brokers looking to educate and help their clients with Long Term Care and understanding the CLASS Act.

Despite our current deficit and the fiscal condition of government programs like Social Security and Medicare, many people believe a Federal program has to be better than private insurance.

I can certainly understand that when you look recent events like government bail outs of banks, automobile manufacturers and homeowners under water with their mortgages. But at some point, bills come due, and the combined effect of America aging and the burden of our current entitlements are the reasons the CLASS Act is to be funded completely by participant premiums.

When you hear your premiums go in to a lock box, do you feel secure? Can you visualize a large box made out of heavy steel with a giant lock? Unfortunately this isn’t how it works. The Federal government uses trust fund accounting. The money coming in from premiums is included with all other revenue collected and used to pay current obligations. At the same time, those premiums are credited to a trust fund that will accumulate interest. The problem is, even the Federal government can’t spend the same money twice.

Anything accumulated in the trust fund becomes an IOU from the general budget and we all know what condition that is in. According to the bi-partisan fiscally conservative Concord Coalition, Congress could have moved the CLASS program entirely out of the budget and invested the premiums in private securities that would have been available to pay claims, but genuinely funding the program would have eliminated money Congress needs to pay for healthcare reform.

In my next blog we look at Myth #3 – CLASS Act premiums are less likely to increase in the future than private insurance.

Empower helps employers of all sizes implement long-term care insurance benefit programs in the workplace and conducts workshops & educational classes concerning LTC and the CLASS Act for employers and employees. If you would like to know more about the CLASS Act and how it might impact your company call us.

We also provide Resources, training, and assistance to brokers looking to educate or help their clients with and Long Term Care and understanding the CLASS Act.

Without crossing into the realm of political opinion of big government vs. small government and the correctness of our entitlement programs, the fact is many Americans believe the Federal government programs come with an official seal of approval. In other words, many people will participate in CLASS Act without fully understanding the issue or the difference between private and the CLASS Act. If it’s run by the government it must be better, right?

Well sometimes reality isn’t pleasant, but CLASS won’t solve the long-term care problem for most people. First, CLASS Act will not enroll its first participant until around 2013, and once enrolled, five years of premiums must be paid in before benefits can be collected. That means anyone older than 57 cannot be eligible to receive benefits until they reach age 65. Considering that 40% of people currently using long-term care services are under the age of 64, CLASS will be too late for you?

CLASS Act will pay a cash benefit of no less than $50 per day based on the number of ADL’s you cannot perform without assistance. That means the minimum annual benefit is pegged at $18,250 per year. Have you looked at the cost of care lately? It varies by the type of care you need or desire and there are large differences depending on the region of the country you live in.

In 2008, the average cost of home care throughout the United States was $20 an hour according to the Metlife Market Survey of Home Care Costs, but if you live in the northeast or other high cost states, the cost is as high as $28 per hour. And if you are in a high cost state like MA nursing homes and assisted living facilities average over $100,000 and $50,000 respectively.

Without education many Americans participating in CLASS will not understand the true nature of the problem and think they are covered with the nominal benefit they’ll be eligible for.

Empower helps employers of all sizes implement long-term care insurance benefit programs in the workplace and conducts workshops & educational classes concerning LTC and the CLASS Act for employers and employees. If you would like to know more about the CLASS Act and how it might impact your company call us.

We also provide Resources, training, and assistance to brokers looking to educate or help their clients with and Long Term Care and understanding the CLASS Act.

Most of the press on CLASS Act hails the program for solving a problem that has devastated millions of American families. And there are some important benefits, but you almost forget that people will need to actually pay premiums themselves that are projected to be $180-$240 per month. By statute, CLASS Act will be funded exclusively by participant premiums. And those premiums must be set to ensure the program is actuarially sound for 75 years.

Adverse selectionI discussed adverse selection on my previous post as causing more unhealthy people to participate in greater numbers than those of healthy people. I think it’s pretty clear why that would cause premiums to be higher than private insurance carriers who require medical underwriting to control cost. With no underwriting, CLASS is a good thing for the sick people who cannot get less expensive private coverage making CLASS a high risk pool for people uninsurable in the private market.

Subsidized premiums
Under CLASS premiums are only $5 per month for students and poor Americans. Noble intention, but subsidizing premiums for a segment of society creates an entitlement for a segment that is paid for by everyone else. The amount of the subsidy is the difference between $5 and aged based premiums projected to be $180-$240 per month. Do you think this could make premiums higher?

Limits on premium increases
CLASS Act boxes the government in a corner with regard to complying with its own regulations and it will require premiums to be higher. Any person who attains age 65, or who has paid in for 20 years and is not working, cannot have their premiums increased. This is good if your premium can’t be increased and not so good if an increase is needed and it must be spread over a smaller number of participants.

Limitation of money that can be spent on marketing and administration
CLASS specifies that 97% of all premium collected must be used to pay benefits. On the surface this sounds like a good thing. Let’s eliminate corporate excess and let the government deliver more bang for the buck. Hmmm. How has the government done with its Social Security and its own budget?

According to the American Society of Actuaries, reviewing claims alone often costs private insurers more than this – and administrative cost of enrollment, premium collection, marketing and education, the last of which is very important if CLASS is to gain widespread participation to avoid adverse selection. Even with extensive educational efforts, private long-term care insurance companies have sold only about 8% of the market to date.

If you are an employer wanting to learn more about how Long Term Care differentiates your benefits or a broker looking to help your clients with Long Term Care, reach out and contact Doug Ross at 800-483-1115 or visit EMpowerLTCI.com.

The primary concern about CLASS Act stems from “adverse selection”. This is a term used by organizations constrained by fundamental rules of business that require financial responsibility. Private insurance companies, for example build products with underwriting to control the cost of their products so they are affordable.

Adverse selection refers to a structural bias that causes a disproportionate number of people to participate who are more prone to need benefits in the future. Adverse selection violates the basic insurance principle of spreading risk over an entire population and will cause claims paid to exceed premiums collected.

Consider the following aspects of CLASS that have caused actuaries to use the term “death spiral” when describing the CLASS Act.

Employees will receive coverage without medical underwriting on a guaranteed issue basis. This concession may also be extended to non-working spouses. Every person who is uninsurable for private coverage will be motivated to participate in CLASS.

Participation is voluntary. Employees can opt-out initially, and opt back in at a later time. Why would a young healthy person participate when they can opt-in at any time?

Premiums are to be set by the Department of Health and Human Services to ensure financial viability for a 75 year period. A nominal benefit of $50-75/day is projected to cost $180-$240/month. With premiums this high participation has been estimated to be as low as 2% of the eligible population.

What is the “death spiral”?

CLASS Act is to be funded exclusively by premiums paid by participants. Participation in the program will be conversely proportionate to the size premiums of the premium. More expensive premiums will depress participation while lower premiums have the opposite effect. The death spiral is that setting premiums high enough to keep the program financially solvent will reduce participation which in turn will also affect the solvency of the program. And the problem is exacerbated the higher the premium is.

The death spiral is a catch 22 situation of sorts. Premiums need to be high enough to make CLASS actuarially sound as defined statute. People with pre-existing conditions will choose the CLASS Act in greater numbers while those who are younger and healthier choose comprehensive private insurance that is more affordable.

When people appraise different health insurance options, they typically evaluate their premiums and deductibles, but rarely question the limitations of the plan. That’s because it’s difficult (if not impossible!) to speculate on potential health care needs or the duration or severity of future health conditions. Where would a person know where to begin?

In actuality, there are three overlooked limits in almost every health insurance plan out there today. It’s this gap in health care that prompted long-term care insurance (LTCI)–a security plan that plugs the holes of traditional health insurance. LTCI ensures comfortable and quality long-term care, something more than half of us will need in our lifetime.

The three areas where health insurance does not protect a person are

Skilled medical care in a nursing home beyond 100 days

Intermediate care (such as rehabilitation) is limited to a period of time or number of visits

Custodial care is not covered at all.

To understand the limits of traditional health insurance, we need to understand the three levels of healthcare.

Skilled Care: Care provided by doctors and skilled medical professionals to make a person well again. Skilled medically needed care is covered by health insurance.

Intermediate Care: Less frequent skilled care. It also is designed to make a person well again.

Custodial Care: This is help with the activities of daily living like walking, bathing, eating, going to the bathroom, or moving around. Skilled care providers do not provide this type of care. It is not therapeutic or designed to make a person well again, and traditional health insurance generally does not pay for it.

When you approach a company to fulfill its employee insurance options, do you educate them about the current gaps in their tradition coverage? Do you offer them an opportunity to enjoy full protection? Do you feel it is our professional obligation to educate companies to help them (and their employees) make informed decisions?

If you are an employer wanting to learn more about how Long Term Care differentiates your benefits or a broker looking to help your clients with Long Term Care, reach out and contact Doug Ross at 800-483-1115